Q1 2024 STAG Industrial Inc Earnings Call

Operator: Greetings and welcome to the STAG Industrial Inc. First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Steve Xiarhos. Thank you, Mr. Xiarhos. You may begin.

Greetings and welcome to the Stag Industrial Inc. First quarter 'twenty 'twenty four earnings conference call. At this time, all participants are in a listen only mode.

Brief question and answer session will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.

As a reminder, this conference is being recorded it is now my pleasure to introduce your host C. Sorrows. Thank you Mr. Giles you may begin.

C. Sorrows: Thank you.

Steve Xiarhos: Welcome to STAG Industrials' conference call covering the first quarter 2024 results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www.stagindustrial.com under the investor relations section. On today's call, the company's prepared remarks and answers to your questions will contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Bordling's statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today. Examples of forward-looking statements include forecasts of core FFO, same-store NOI, GNA, acquisition and disposition volumes, retention rates, and other guidance. Leasing Prospects, Rent Collections, Industry and Economic Trends, and other matters.

C. Sorrows: Welcome to Stag Industrials conference call covering the first quarter 'twenty 'twenty four results. In addition to the press release distributed yesterday, we have posted an unaudited quarterly supplemental information presentation on the company's website at www Dot stag industrial dot com under the Investor Relations section.

C. Sorrows: On today's call the company's prepared remarks answers to your questions will contain forward looking statements as defined in the private Securities Litigation Reform Act of 1995.

C. Sorrows: Looking statements address matters that are subject to risks and uncertainties that may cause actual results to differ from those discussed today.

C. Sorrows: Examples of forward looking statements include forecasts of courses, how same store NOI G&A acquisition and disposition volumes retention rates another guidance.

C. Sorrows: Leasing prospects rent collections industry, and economic trends and other matters.

Steve Xiarhos: We encourage all listeners to review the more detailed discussion related to these forward-looking statements contained in the company's filings with the SEC and the definitions and reconciliations of non-GATT measures contained in the supplemental information package available on the company's website. As a reminder, forward-looking statements represent management's estimates as of today, and STAG Industrial assumes no obligation to update any forward-looking statements.

C. Sorrows: We encourage all listeners to review the more detailed discussion related to these forward looking statements contained in the company's filings with the SEC.

C. Sorrows: Definitions and reconciliations of non-GAAP measures contained in our supplemental information package available on the company's website.

C. Sorrows: As a reminder, forward looking statements represent managements estimates as of today.

C. Sorrows: Industrial assumes no obligation to update any forward looking statements.

Steve Xiarhos: On today's call, you'll hear from Bill Crooker, our Chief Executive Officer, and Matt Pinard, our Chief Financial Officer. Also here with us today is Mike Chase, our Chief Investment Officer, and Steve Kimball, AVP of Real Estate Operations, who are available to answer questions specific to their areas of focus. I'll now turn the call over to Bill.

C. Sorrows: On today's call you'll hear from Bill Crooker, our Chief Executive Officer, Mats Dennard, Chief Financial Officer.

Speaker Change: Also here with US today is Mike Chase, our Chief investment Officer, and Steve Kimball EVP of real estate operations, we're available to answer questions specific to the areas of focus.

William R. Crooker: Ill turn the call over to bill thank.

William R. Crooker: Thank you, Steve. Good morning, everybody, and welcome to the first quarter earnings call for STAG Industrial. We're pleased to have you join us and look forward to telling you about the first quarter 2024 results. The first quarter reflects the continuation of our strong operating results achieved last year. Our view on the business remains consistent with our fourth quarter call, as anticipated.

William R. Crooker: Thank you Steve Good morning, everybody and welcome to the first quarter earnings call for Stag industrial.

William R. Crooker: We're pleased to have you join us and look forward to telling you about the first quarter of 'twenty 'twenty four results.

William R. Crooker: The fourth quarter reflects the continuation of our strong operating results achieved last year.

William R. Crooker: Our view on that business remains consistent with our fourth quarter call.

William R. Crooker: As anticipated.

William R. Crooker: There are pockets of softness in certain markets, which is driven by increased supply coming online. Additionally, tenants are taking longer to make leasing decisions, which is impacting market occupancy. These dynamics were incorporated in our initial view for the year.

William R. Crooker: Pockets of softness in certain markets, which is driven by increased supply coming online.

William R. Crooker: Additionally, tenants are taking longer to make leasing decisions, which is impacting market occupancy.

William R. Crooker: These dynamics were incorporating our initial view for the year.

William R. Crooker: We continue to expect marker rank growth in the mid-single digits for our portfolio. Primarily driven by the volatile interest rate environment, forecasted deliveries for 2024 and 2025 are expected to decrease to just 2.1% and 1.6% of stock, respectively. This is a decrease as compared to the forecast 90 days ago. Interstate volatility has reemerged today after stability in the first three months of the year.

William R. Crooker: We continue to expect market rent growth in the mid single digits for our portfolio.

C. Sorrows: Primarily driven by the volatile interest rate environment forecasted deliveries for 2024, and 2025 are expected to decrease to just two 1% and 1.6% stock respectively.

C. Sorrows: This is a decrease as compared to the forecast 90 days ago.

C. Sorrows: Interest rate volatility has reemerged today after stability in the first three months of the year.

William R. Crooker: This will likely pressure the transaction market, which saw increased activity earlier in the year. In the first quarter, we closed on a 700,000-square-foot Class A cross-docked warehouse for $50.1 million. This building was acquired at cash and straight-line cap rates of 6.1% and 6.8%, respectively. Located in the Westchester Submarket of Northern Cincinnati, the building benefits from its multiple access points and proximity to I-75. The building is leased to a tenant with an internal credit rating of Double D. The lease has 6.8 years of remaining term and weighted average rent escalators of 4.1%, providing stable NOI growth throughout the term. These rents were also 13% below market at acquisition.

C. Sorrows: This will likely pressure the transaction market, which saw increased activity earlier in the year.

C. Sorrows: In the first quarter, we closed on a 700000 square foot class.

C. Sorrows: I say cross dock warehouse for $51 million. This building was acquired a cash and straight line cap rates of six 1% and six 8% respectively.

C. Sorrows: Okay, and then the Westchester Submarket of northern Cincinnati, the building benefits from its multiple access points and proximity to I 75.

C. Sorrows: The building is leased to a tenant with an internal credit rating of double D.

C. Sorrows: At least has six eight years of remaining term and weighted average rent escalators of four 1% providing stable NOI growth throughout the time.

C. Sorrows: These rents were also 13% below market at acquisition.

William R. Crooker: Subsequent to Quarter End, we acquired three buildings for $85 million at a 6.4% cash cap rate. On the development front, we have over 1.2 million square feet of activity across three projects located in the southeastern U.S. Two projects are in the Greenville-Spartanburg, South Carolina market. The first is our two-building, 715,000 square foot development project in Greer, located next to the airport, BMW manufacturing facility, inland port, and I-85. The remaining construction, including four offices for multi-tenant use, was completed in February 2024.

C. Sorrows: Subsequent to quarter end, we acquired three buildings for $85 million at a six 4% cash cap rate.

William R. Crooker: Stabilization is projected to occur in Q2 2025. Our second project is a 233,000 square foot development in Spartanburg. The building was purchased during construction in Q4 2023 with a Q2 2024 estimated delivery date. Stabilization is projected to occur in Q2 2025. The third development project is our two building, 298,000 square foot project in Tampa, Florida. These buildings are under construction with a Q4 2024 estimated delivery date and stabilization in late 2025.

C. Sorrows: On the development front, we have over one 2 million square feet of activity across three projects located in the southeastern U S. Two projects are in the Greenville, Spartanburg, South Carolina market.

C. Sorrows: The first is our two building 715000 square foot development project in Korea.

C. Sorrows: Located next to the airport M.

C. Sorrows: M W manufacturing facility.

C. Sorrows: Inland Port and I 85.

C. Sorrows: The remaining construction, including four offices for multi tenant use was completed in February 2024.

C. Sorrows: Stabilization is projected to occur in Q2 2025.

C. Sorrows: The second project is a 233000 square foot development in Spartanburg.

C. Sorrows: The building was purchased during construction in Q4 2023.

C. Sorrows: With a Q2 'twenty 'twenty four estimated delivery date staples.

C. Sorrows: Stabilization is projected to occur in Q2 2025.

C. Sorrows: The third development project is our two building 298000 square foot project in Tampa, Florida.

C. Sorrows: These buildings are under construction with a Q4 2020 for estimated delivery date and stabilization in late 2025.

William R. Crooker: The suite sizes of approximately 50,000 square feet align well with demand in this high barrier to entry, low vacancy market. With that, I will turn it over to Matts, who will cover our remaining results and updates to guidance. Thank you, Bill.

C. Sorrows: The suite sizes of approximately 50000 square feet aligned well with demand in this high barrier to entry low vacancy market.

C. Sorrows: With that I will turn it over to Matt who will cover our remaining results and updates to guidance. Thank you Bill and good morning, everyone corporates all per share was 59 cents for the quarter, an increase of seven 3% as compared to last year.

Matts S. Pinard: Thank you, Bill, and good morning, everyone. Core FFO per share was $0.59 for the quarter, an increase of 7.3% as compared to last year. Cash available for distribution totaled $98.1 million, an increase of 8.9% as compared to the prior period. We retained approximately $29.5 million of cash flow after dividends paid through March 31. These dollars are available for incremental investment opportunities, debt repayment, and other general corporate purposes. Average debt remains low with net debt to annualized run rate adjusted EBITDA equal to 4.9 times.

Matt: Cash available for distribution totaled $98 $1 million, an increase of eight 9% as compared to the prior period.

Matt: We retained approximately $29 $5 million of cash flow after dividends paid through March 31st. These dollars are available for incremental investment opportunities that repayment and other general corporate purposes.

Matt: Leverage remains low with net debt to annualized run rate adjusted EBITDA equal to four nine times.

Matts S. Pinard: Liquidity stood at $1.1 billion at quarter end, inclusive of available forward EPM proceeds and committed private placement debt proceeds. During the quarter, we commenced 29 leases totaling 4.3 million square feet, which generated cash and straight line leasing spreads of 30.5% and 43.6%, respectively. Attention was 84.2%.

Matt: Liquidity stood at $1 $1 billion at quarter end inclusive of available foreign ATM proceeds and committed private placement debt proceeds.

Matt: During the quarter, we commenced 29 leases totaling $4 3 million square feet, which generated cash and straight line leasing spreads of 35% and 43, 6% respectively.

C. Sorrows: Retention was 84, 2%.

Matts S. Pinard: It achieved same store cash and oil growth of 7.1% for the quarter. The two primary drivers include the impact of substantial leasing spreads achieved at two Burlington, New Jersey, assets in the second half of 2026. This contributed to same-score growth in the beginning of 2024 versus the comparison period. We also benefited this quarter from free rent provided in the first quarter of 2020.

C. Sorrows: Q2, same store cash NOI growth of seven 1% for the quarter.

C. Sorrows: Two primary drivers include the impact of substantial leasing spreads achieved to Burlington, New Jersey assets in the second half of 2023.

C. Sorrows: This contributed to same store growth in the beginning of 'twenty 'twenty four versus the comparison period. We also benefited this quarter from free rent provided in the first quarter of between 23.

Matts S. Pinard: Moving to capital market activity, year to date, we've issued 794,000 shares on a forward basis under our ATM program, with a gross average share price of $38.94, resulting in gross proceeds of $31 million. As of today, we have approximately $72 million of forward equity proceeds available to fund at our discretion. Equity will be used to pay down the revolver and match under the acquisition and development pipeline. On March 13th, the company entered into a note purchase agreement to issue $450 million of fixed-rate senior unsecured notes in a private placement office.

C. Sorrows: Moving to capital market activity year to date, we've issued 794000 shares on a forward basis under ATM program, a gross average share price of $30.94, resulting in gross proceeds of $31 million as of today, we have approximately $72 million of forward equity proceeds available to fund at our discretion.

C. Sorrows: Equity will be used to pay down the revolver and match fund our acquisition and development pipeline.

Matts S. Pinard: The notes consisted of 5, 7, and 10 year tenors with a weighted average fixed interest rate of 6.17%. The notes will be funded on May 28. On March 25th, the company refinanced the $200 million term loan S, which was scheduled to return in January 2025. The term loan now matures on March 25th, 2027 with two one-year extension offers. The term loan bears an aggregate fixed interest rate, inclusive of interest rate swaps, of 2.94 percent until January 15, 2025, and will bear an aggregate fixed interest rate, inclusive of interest rate swaps, of 4.83 percent from January 15, 2025 through maturity on March 25, 2027.

C. Sorrows: On March 13th the company entered into a note purchase agreement to issue $450 million of fixed rate senior unsecured notes in a private placement offering.

C. Sorrows: It's consistent of five seven and 10 year tenors with a weighted average fixed interest rate of 6.17% notes will be funded on May 28.

C. Sorrows: On March 25th the company refinanced the $200 million term loan.

C. Sorrows: It was scheduled to mature in January 2025.

C. Sorrows: Now matures March 25th 2027, with two one year extension options.

C. Sorrows: Term loan bears an aggregate fixed interest rate inclusive of interest rate swaps of 294% until January 15th playing 25, and what bearing the aggregate fixed interest rate inclusive of interest rate swaps a 4.83% from January 15.5 through maturity of March 25th point 27.

Matts S. Pinard: We experienced 9 basis points of credit losses in the first quarter, which is in line with our initial guidance of 50 basis points. Given the relative health of our portfolio as described by Bill and reflecting our quarterly results, we are maintaining guidance at this time. I will now turn it back over to Bill.

C. Sorrows: We experienced 90 basis points of credit loss in the first quarter, which is in line with our initial guidance of 50 basis points.

C. Sorrows: Given the relative health of our portfolio as described by Joe and reflecting on our quarterly results. We are maintaining guidance at this time I will now turn it back over to Bill.

William R. Crooker: Thank you, Matts. I want to thank our team for the continued hard work and achievement towards our 2024 goals. Our team continues to drive value in all macro environments. We are well positioned for sustained growth through our operating and acquisition platform. We'll now turn it back to the operator for questions.

William R. Crooker: Thank you mats I want to thank our team for their continued hard work and achievement towards our 'twenty 'twenty four goals.

William R. Crooker: Our team continues to drive value in all macro environments.

William R. Crooker: We're well positioned for sustained growth through our operating and acquisition platform.

Speaker Change: I will now turn it back to the operator for questions.

Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key.

Speaker Change: Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Information tone will indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for.

William R. Crooker: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

William R. Crooker: At this time, we are limiting participants to one question and one follow up question. One moment. Please while we poll for questions.

Operator: At this time, we are limiting participants to one question and one follow-up question. One moment, please, while we poll for questions. Our first question comes from Craig Mailman from Citi. Please proceed. Good morning, guys. Phil, I just want to go back here.

William R. Crooker: Our first question comes from Craig Mailman from Citi. Please proceed.

Craig Allen Mailman: Good morning, guys. Phil, just want to go back to your commentary that, you know, you guys maintain guidance. Basically, you had what you thought was a more prudent outlook here, you know, pockets of softness from your supply, a longer decision-making time frame embedded. As you guys saw the first quarter play out, were there any surprises across individual markets or size or, you know, perceived A versus B in a given market that would, you know, maybe have pushed you toward things trending a little bit better? Or is everything kind of just on budget at

Craig Allen Mailman: Hey, good morning, guys.

Craig Allen Mailman: Phil just want to go back to your commentary that you know you guys maintained guidance.

Craig Allen Mailman: Basically you had what you thought was more prudent outlook here, you know pockets of softness from new supply a longer decision, making timeframe embedded as you guys saw the first quarter play out were there any surprises.

Craig Allen Mailman: Across individual markets or size or perceived a versus b in a given market.

Speaker Change: That would you know.

Speaker Change: Maybe have pushed you towards.

Speaker Change: Things trending a little bit better or is everything kind of just on budget at this point.

William R. Crooker: Using our initial guidance, everything is tracking. In line with that, in terms of surprises to the upside or downside for this year, none so far. I mean, we've maintained all of our guidance, so everything is pretty steady. Just macro trends, the only thing that we're starting to see across some markets doesn't really impact us as much as just a little bit more of that big box supply is starting to get leased, which is, I think, a good sign for the overall economy and the industrial market as a whole, but that's just the early beginnings there.

Speaker Change: Interesting our initial guidance everything is tracking.

Speaker Change: In line with that in terms of surprises to the upside or downside for this year.

Speaker Change: None to date, I mean, where we've maintained all of our guidance. So everything is pretty steady.

William R. Crooker: Just you know macro trends the only thing that we're starting to see across our markets doesn't really impact us as much as just a little bit more of that big box. Our supply is starting to get leased which is I think a good sign for the you know the overall economy and the industrial market as a whole, but that's it that's just the early beginnings here.

William R. Crooker: Yeah.

Craig Allen Mailman: Okay, then from a rent spread perspective, the spreads on new leases commenced this quarter were a little bit below average versus prior quarters. And if we look at, you know, the incremental 12% of the kind of the target you guys achieved this quarter, it looked like kind of low double-digit spreads versus the closer to 29.5% for the closer to 69%. Can you just talk a little about what you're seeing on those two things?

Speaker Change: Okay, and then from a rent spread perspective kind of the the spreads on new leases commenced this quarter were a little bit below average versus prior quarters. If we look at.

Speaker Change: You know the the incremental 12% of the kind of the target you guys achieved this quarter.

Speaker Change: Looked like kind of low double digit spreads versus your closer 29, and a half for the year closer to 6% can you just talk a little about what what youre seeing on those two things.

William R. Crooker: Yeah, a couple things there. The new leasing activity was pretty light in the first quarter, as expected. We've signed five leases for 700,000 square feet. So when we look at the full year, which is what our guidance is related to, those leasing spreads for new leases and renewal leases should be pretty consistent, all in the high 20s. I would think our guidance right now is between 25% and 30%, and cash leasing spreads will probably be on the higher end of that range.

Speaker Change: A couple of things there the new leasing activity was was pretty light in the first quarter as expected.

Speaker Change: We signed five leases for 700000 square feet.

Speaker Change: No.

Speaker Change: When we look at the full year, which is what our guidance is related to.

Speaker Change: Those leasing spreads for new leases and renewal leases should be pretty consistent all in the you know the high high twenties I would think.

Speaker Change: Our guidance right now is 25% to 30% cash leasing spreads will probably be on the higher end of that range.

William R. Crooker: With respect to the incremental leasing from our last update to this quarterly report, we had a number of fixed rate renewal options that just hit in this quarter. We fully expected that to happen. That is incorporated in our leasing spread guidance for the year. So, everything is in line with initial expectations, and I would say there are no takeaways from some of the smaller leasing spreads, the incremental leasing spreads in the back half of the first quarter.

Speaker Change: With respect to the incremental leasing.

Speaker Change: From our last update to this quarterly report we had a number of fixed rate renewal options that just hit in this quarter. We fully expected that that's you know that happened.

Speaker Change: That is incorporated in our in our leasing spread guidance for the year. So everything is in line with initial expectations and.

Speaker Change: I would say no takeaways from you know some of the smaller leasing spreads incremental leasing spreads in the back half of the first quarter.

Craig Allen Mailman: If I could slip a third one in, I know I'm cheating, but your investment pipeline looks pretty robust and kind of picked up sequentially. I know there's been a little bit of volatility on the macro side of things, but should we expect that this is kind of a sustainable pickup here, or what's your view on deploying more capital in this kind of higher rate environment?

Speaker Change: If I could slip a third one and then cheating but.

Speaker Change: [laughter] your investment pipeline looks pretty robust and kind of picked up sequentially.

Speaker Change: No theres been so little bit of volatility in the macro side of things should we expect that that's kind of a sustainable pick up here or whats your view on kind of deploying more capital in this kind of higher rate environment.

William R. Crooker: Yeah, I mean, the pipeline picked up primarily because of some of the activity in the first quarter. I'll let Mike Chase talk a little bit more about the pipeline, and then I can come back and answer some of you about our expectations for acquisitions and returns.

Speaker Change: Yeah, I mean, the pipeline picked up primarily because of some of the activity in the in the first quarter I'll, let Mike Chase talk a little bit more of a pipeline and then I can I can come back and answer some of you know our expectations for acquisitions and return thresholds and thanks Bill So the pipeline grew.

Michael Christopher Chase: Thanks, Bill. So the pipeline grew immediately out of the gate at the beginning of the first quarter, and it accelerated and gained momentum throughout the quarter. Anecdotally, we underwrote four times the number of deals in Q1 of 24 than we did in Q1 of 23. So there was plenty of momentum during the quarter. That was indicative of the increase in the pipeline. At the end of the quarter and in April, when the 10-year spiked, interest rates rose.

Michael Christopher Chase: Immediately out of the gate in the beginning of the first quarter.

Michael Christopher Chase: And an accelerated and gained momentum throughout the quarter.

Michael Christopher Chase: Anecdotally, we underwrote four times the number of deals in Q1 of 'twenty four and then we did in Q1 of 23.

Michael Christopher Chase: So there was plenty of momentum during the quarter that was indicative of the increase in the in the pipeline.

Michael Christopher Chase: At the end of the quarter and in April when the tenure spiked interest rates rose.

Michael Christopher Chase: Volatility crept back into the market. We don't know if that's going to be permanent or whether that's going to be short term. We don't know what the effect will be on the pipeline going forward. But that's where the increase in the pipeline came from. Yeah, typically when you see a spike like this. Either Dale will sit on the pipeline for longer, maybe

Michael Christopher Chase: Volatility crept back into the market, we don't know if that's going to be permanent or whether that's going to be short term and we don't know what the effect will be on on the pipeline going forward.

Michael Christopher Chase: But that's where the increase in the pipeline, yes, typically when you see a spike like this.

Michael Christopher Chase: Yeah, typically, when you see a spike like this, deals sit in the pipeline for longer, maybe they get retraded, maybe it just takes a little bit longer to close the deal, and sometimes deals get pulled off the market.

Michael Christopher Chase: Either deal sit on the pipeline for longer maybe they get re traded maybe it just takes a little bit longer to close the deal.

Steve Xiarhos: And sometimes deals get pulled off the market so.

Michael Christopher Chase: So it's too early to tell whether this is entering into a new price discovery phase. But we're pretty nimble when it comes to this. We've shown that over the past several years. So we'll continue to be nimble at this point where our underwriting thresholds, especially for going in, you know, cash cap rates have increased due to, you know, the cost of capital increasing. So we'll continue to evaluate that and see the impacts.

Michael Christopher Chase: It's too early to tell whether this is entering in it into a new price discovery phase.

Michael Christopher Chase: We're pretty nimble when it comes to this we've shown that over the past several years. So we'll continue to be nimble.

Michael Christopher Chase: At this point, where you know our underwriting thresholds.

Michael Christopher Chase: Especially for going in cash.

William R. Crooker: Cash cap rates have increased due to the cost of capital increasing so.

Michael Christopher Chase: We will continue to evaluate that and see the impacts with respect to our guidance.

Michael Christopher Chase: With respect to our guidance, the guidance was a wider range than a normal year, but we expect to be within that guidance this year. And if this, you know, higher for longer rate environment continues, and seller expectations don't change, then I would expect in that situation that we might be at the lower end of our acquisition guidance. I just want to remind everybody that our acquisition guidance is heavily backend weighted for the year. So there's not a lot of NOI impact from acquisitions in our 2024 guidance.

Michael Christopher Chase: The guidance was a wider range than in a normal year, we expect to be.

Michael Christopher Chase: Within that guidance this year and if this higher for longer rate environment continues and seller expectations don't change then I would expect in that situation that we might be at the lower end of our acquisition guidance I just do want to remind everybody that our acquisition guidance is heavily.

William R. Crooker: The back end weighted.

Michael Christopher Chase: In the year, so there's not a lot of NOI impact from acquisitions in our 2020 for guidance.

Speaker Change: Perfect. Thank you.

Speaker Change: Thank you.

Operator: Our next question comes from Vince Tibone from Green Street. Please proceed.

Michael Christopher Chase: Our next question comes from Vince Cribellum from Green Street. Please proceed.

Vince James Tibone: Hi, good morning. I just wanted to follow up again a little bit more on kind of the private transaction markets and rates having moved higher, just to maybe ask directly, like, are you seeing and hearing, you know, a lot of retrading activity in the market today? And do you get a sense like, you know, bids are going to get, you know, adjusted lower in real time, just due to a higher cost of debt? Or, as you alluded to, is it, you know, kind of still a little early to see those signs?

Vince James Tibone: Hi, Good morning, just wanted to follow up again, a little bit more on kind of the private transaction market in general.

Vince James Tibone: It's a move higher just to maybe ask directly like are you seeing and hearing a lot of re trading activity in the market today and do you just get a sense like Youre getting you had adjusted lower in real time, just due to a higher cost of debt or kind.

Vince James Tibone: You alluded to that kind of still a little early to see those signs.

William R. Crooker: Yeah, you just nailed it. It's a little early. Okay, we'll probably get a little bit, you know, more feedback and data on that in the next, you know, four to six weeks. I mean, it's it, you know, the spiked called, you know, 20, 30 basis points in 10 years. So some sellers, some buyers will just absorb that if they really like the transactions, and some may look for a retrade price a little bit. So we'll see how that shakes out.

Speaker Change: Yeah, you just you just know that it's a little early okay, we'll probably get a little bit more feedback and data on that in the next four to six weeks.

Vince James Tibone: I mean, it's it.

William R. Crooker: Spike call it 2030 basis points and the 10 year so.

William R. Crooker: Some sellers some buyers will just absorb that if they really like the transactions and yeah. Some may may look for to re trade price a little bit so well well see how that shakes out.

Vince James Tibone: Got it. And then are you seeing any more products come to market that are like vacant merchant builds, speculative projects? And I'm just curious, like, is that an area where you would potentially, you know, move to on the acquisition side, you know, a little more on the value add, thinking about some leasing risk, just kind of curious how you guys would think about the right spread to take on leasing risk versus, you know, a stabilized acquisition like we did in the first quarter and sounds like the deals we did subsequent to quarter end.

Speaker Change: Got it and then are you seeing any more product come to market like vacant merchant builds spare.

Vince James Tibone: Speculative projects and I'm, just curious like is that an area, where you would potentially.

Vince James Tibone: The move to on the acquisition side, a little more on the value add taking on some leasing risk.

Vince James Tibone: Just kind of curious how you guys are thinking about the rate spread to take on leasing risk versus stabilized acquisition.

Vince James Tibone: Did in the first quarter and it sounds like the deals you've done.

Vince James Tibone: Sequential quarter end.

William R. Crooker: Yeah, we're certainly open to taking on immediate leasing risk. If you look at the acquisition, in one of the acquisitions in the fourth quarter, we acquired one vacant building in Welford, South Carolina, that we underwrote a 12-month downtime on. And at that point, we're underwriting a 7% cash cap rate. Within a couple weeks of acquiring the deal, we leased it up at a seven and a half cap rate, right? So it was a great return, one where we took a little bit more risk, but we got a much bigger return.

Vince James Tibone: Yeah, we're certainly open to taking on immediate leasing risk if you look at the.

William R. Crooker: Yeah the acquisition.

William R. Crooker: One of the acquisition in the fourth quarter, we acquired the one vacant building and welfare in South Carolina.

William R. Crooker: That we underwrote, a 12 month downtime and at that point, where we're underwriting a 7% cash cap rate.

William R. Crooker: Within a couple of weeks of acquiring the deal we leased it up.

Vince James Tibone: At a seven five cap rate right. So that was a great return, one where we took a little bit more risk, but we got a much bigger return.

William R. Crooker: So those are opportunities, we'll certainly evaluate them, but if we're gonna take leasing risks, we want them to really understand the leasing environment understand how that building fits at sub market and require additional return with respect to the pipeline Mike I don't know if you have any additional comments, but the pipeline today as it compares to.

William R. Crooker: So those are opportunities we'll certainly evaluate. But if we're going to take a leasing risk, we want to really understand the leasing environment, understand how that building fits that submarket, and require additional return. With respect to the pipeline, Mike, I don't know if you have any additional comments, but the pipeline today as it compares to the fourth quarter, in my understanding, the amount of vacant assets, value-add assets, is pretty consistent. I think the growth in the pipeline is primarily due to just more transactions coming to market as the market opened up in the first quarter. Mike, I don't know if you have anything else to add.

Mike: The fourth quarter am I understanding the amount of vacant assets value add assets is pretty consistent I think the growth in the pipeline is primarily due to just more transactions coming to market as the market opened up in that in the first quarter of my kind of anything I said, yeah. I mean, I think if there was any any tilt.

Michael Christopher Chase: Yeah, I mean, if there was any, any tilt, it tilted a little bit towards stabilized transactions. And there were a few mid-, small to medium-sized portfolios that came out on the market, which we hadn't seen at the end of 2023. So, but in general, it's pretty consistent with the makeup of the pipelines of the past.

Michael Christopher Chase: It felt it a little bit towards stabilized transactions and there were a few mid small to medium size portfolios that that came out on the market, which we hadn't seen at the end of the of 2023, so but in general it is pretty consistent with the makeup of the pipelines in the past, yes, I mean, the first quarter. It certainly felt like the market was.

William R. Crooker: Yeah, I mean, the first quarter certainly felt like the market was opening up with the stability of interest rates. I mean, we saw, you know, in a market that we're very active in with a strong portfolio, 234 million that traded. You weren't seeing that at the back half of last year. So it felt like a pretty healthy environment.

Turning up with the stability of interest rates and what we saw.

And in a market that we're very active with a.

William R. Crooker: Our strong portfolio is 234 million net that traded you arent seeing that at the back half of last year. So it was felt like a pretty healthy environment and.

William R. Crooker: I don't know if it's just a quick pause here with this with this spike we'll certainly share more of this afternoon with the fed but.

Vince James Tibone: And I don't know if it's just a quick pause here with this spike. We'll certainly hear more this afternoon with the Fed. But if the Fed comments, yes, skew negative, it could be a longer pause. Makes sense.

Vince James Tibone: If if the fed comments.

Vince James Tibone: Yes, SKU negative it could be a longer pause.

William R. Crooker: Make sense? Thanks for the time.

Speaker Change: Makes sense thanks for the time.

Speaker Change: Thank you.

Operator: Our next question comes from Eric Borden from BMO Capital Markets. Please proceed.

William R. Crooker: Our next question comes from Eric Gordon from BMO Capital markets. Please proceed.

Eric Martin Borden: Hey, good morning, everyone. Just sticking with the acquisition theme. Just notice the acquisitions closed post-first quarter; those boxes, they just appear to be a little bit on the larger side versus your in place portfolio. Curious about, you know, what the strategy in terms of external growth is? Are you looking for, you know, more larger size boxes or was that just in relation to what was available in the transaction market at that time that you saw attractive? Thank you.

Eric Martin Borden: Hey, good morning, everyone, just sticking with the acquisition theme.

Eric Martin Borden: Notice the acquisitions closed post the first quarter those boxes. They just appear to be a little bit on the larger side versus your in place portfolio. Just curious about what is the strategy in terms of external growth or are you looking for more.

Eric Martin Borden: More larger sized boxes or was that just in relation to what was available in the transaction market at that time that you saw attractive. Thank you.

William R. Crooker: Yeah, we just look for the best risk-adjusted returns, Eric, and sometimes that's a vacant asset, as I just mentioned with Vince, or it could be, you know, a longer stabilized asset that produces, you know, really strong cash flow with great escalators, and the building fits a submarket. With respect to the acquisitions that were acquired subsequent to quarter end, it was one large one. We acquired a 590,000 square foot facility in Louisville, Kentucky, a market that we know really well, but that skewed those three acquisitions.

Speaker Change: Yeah, we're just looking for the best risk adjusted returns Aric and sometimes that's a vacant asset I'd say just mentioned.

William R. Crooker: With Vince or it could be.

William R. Crooker: Longer stabilized asset.

William R. Crooker: That produces.

William R. Crooker: Really strong cash flow with great escalators in the building fits a submarket with respect to.

William R. Crooker: The other two acquisitions were 150,000 square foot facilities and 100,000 square foot facilities. So on average, it looks a little higher, but it was just skewed by one. But it was in a larger building, was a market that we're very comfortable with. We own in, we just did some leasing activity in that market, and an asset that we think is a long-term, strong long-term fit for the portfolio.

William R. Crooker: The acquisitions that were acquired subsequent to quarter end.

William R. Crooker: There was one large one we acquired a.

William R. Crooker: 590000 square foot facility in Louisville, Kentucky, a market that we know really well, but that's skewed those three acquisitions. The other two acquisitions was 150000 square foot facility and 100000 square foot facility. So on average it looks a little higher but it was just skewed by one but it was in them that larger.

William R. Crooker: Building was a market that we're very comfortable with we own and we just had some leasing activity in that market.

William R. Crooker: And an asset that we think is a long term.

William R. Crooker: Strong long term care for the portfolio.

William R. Crooker: Is that a single tenant user, or is that more multi-tenant?

William R. Crooker: Is that a single tenant user or is that more multi tenant.

William R. Crooker: That was a single tenant user.

William R. Crooker: That was a single tenant user.

Eric Martin Borden: Okay. That's helpful. And then my follow-up question, Matts, just to clarify: you said that there was nine basis points of credit loss in the first quarter.

Speaker Change: Okay. That's helpful. And then my follow up Matt just to clarify did you said that there is there was nine basis points of credit loss in the first quarter.

Matts S. Pinard: Eric, that's correct. Nine basis points of credit loss in the quarter. Our guidance is 50 basis points for the year, and you know we've maintained that guidance. I know obviously if you want to annualize the nine basis points, it looks like it's less than the 50, but you know just given where we are in the calendar, given you know some of the uncertainty that you're seeing in the headlines, 50 basis points is the right number for us, and we'll continue to update the market as we progress through the year All right, that's helpful. Thanks.

Eric Martin Borden: Eric that's correct nine basis points of credit loss in the quarter. Our guidance is 50 basis points for the year and we are maintaining that guidance I know obviously, if you if you want to annualize the 90 basis points. It looks like it's less than 50, but just given where we are in the calendar given some of the uncertainty that you've seen the headlines you know 50 basis points is the right number four.

Matts S. Pinard: Yes.

Matts S. Pinard: We'll continue to update the market as we progress through the year.

Eric Martin Borden: All right, that's helpful. Thanks, everyone.

Speaker Change: All right that's helpful. Thanks, everyone.

Operator: Our next question comes from Nick Thillman from Baird. Please proceed.

Eric Martin Borden: Our next question comes from Nick Fillman from Baird. Please proceed.

Nicholas Patrick Thillman: Hey, good morning, guys. You guys reaffirmed kind of that market rent growth forecast in the mid-single digits, but maybe just a little curious about kind of the markets where you're seeing the most weakness. I know last quarter you kind of called out Columbus, Indianapolis, and select areas of Dallas, but just curious about some market commentary there.

Nicholas Patrick Thillman: Hey, Good morning, guys, you guys reaffirmed kind of that market rent growth forecast of mid single digits, but maybe just a little curious on kind of the markets, where you're seeing like the most weakness I know last quarter, you kind of called out Columbus, Indianapolis and select areas of Dallas, but just curious on some market commentary there.

William R. Crooker: Yeah, the market rent growth we've guidance we affirmed, as you noted, with respect to markets, weaker markets, still seeing some weakness in India and Columbus, seeing weakness in Phoenix, seeing some weakness in some of the more historical higher growth markets, Southern California, some parts of New Jersey. But on the other end, there are a lot of strong markets out there that we operate in that are seeing vacancy rates of some 5%, some 4%, some 3%.

Nicholas Patrick Thillman: Yeah, the the market rent growth with our guidance we affirmed.

William R. Crooker: As you noted with respect to markets weaker markets, you're still seeing some weakness in Andy in Columbus.

William R. Crooker: <unk> seen weakness in Phoenix seeing some weakness in some of their more historical higher growth markets Southern California, some parts of New Jersey.

William R. Crooker: But then the other end, there's a lot of strong markets out there.

William R. Crooker: We operate in that are seeing vacancy rates sub 5%, some 4% some 3% Tampa is a market.

William R. Crooker: Tampa is a market that's right around 3%. Sacramento is doing really well, Chicago is right around 5%; I think a little bit under 5% vacancy. Milwaukee is strong. Detroit, Nashville, Reno, El Paso, all these markets that we're operating in have really strong fundamentals and balanced supply and demand. They didn't have that excess supply coming online. There are still strong demand drivers there, and those markets are just really steady right now.

William R. Crooker: That's right around 3% Sacramento is doing really really well Chicago is right at 5% I think a little bit sub 5% vacancy Milwaukee's strong Detroit Nashville, Reno El Paso all of these markets that we're operating well operating in are you know really strong fundamentals and balanced.

William R. Crooker: Supply and demand and they didn't have that access supply coming online there's still strong demand drivers there and those markets are just Israeli study right now.

William R. Crooker: That's helpful and then maybe Matt talking a little bit.

William R. Crooker: Credit maybe any changes to your sort of tenant watch list and are there any industries you are kind of watching out for or do you feel there might be a little bit of softness there and you're kind of monitoring a little bit more.

William R. Crooker: Thanks for the question. Simply put, our watch list is almost identical, very similar to the last time we were on the phone in February. We're not seeing anything thematic in terms of distress across the portfolio or tenancy.

William R. Crooker: [inaudible] to answer the question, you know, simply put on a watch.

Speaker Change: Hi, Nick Thanks for the question.

William R. Crooker: Simply put our watch list.

William R. Crooker: Almost identical very similar to the last time, we're on the phone in February.

William R. Crooker: Not seeing anything dramatic in terms of distress across the portfolio tenancy you know it was asked the questions. There is nothing specific to a sector or geography. It really is just.

William R. Crooker: We ask the questions. There's nothing specific to a sector or geography. It really is just unique situations. The nine basis points is great. The 50 basis points, again, we believe is the right level. Guidance in April for 2024.

William R. Crooker: Just unique situations the nine basis points as great 50 basis points again, we believe is the right.

William R. Crooker: Guidance in April for 2024.

Speaker Change: Thank you.

Operator: Our next question comes from Jason Belcher from Wells Fargo. Please proceed.

William R. Crooker: Our next question comes from Jason Belcher from Wells Fargo. Please proceed.

Jason Belcher: Yeah, hi, I'm just wondering if you could talk about any pockets of strength or weakness you're seeing across your different tenant industries, or you know, other groups that are being more aggressive than others and taking space, and on the flip side, are some pulling back more than others.

Jason Belcher: Yeah, Hi, I was just wondering if you all could talk about any pockets of strength or weakness you're seeing across your different tenant industries or other groups that are being more aggressive than others and taken space in the flip side as you know there are some pulling back more than others.

William R. Crooker: I would say there are no major themes where we're seeing this year with respect to industries. We're still seeing demand from logistics companies; 3PL demand is still holding up. So, no, you know, no major themes.

Speaker Change: I would say Theres no themes, where we're seeing this year with respect to industries, we're still seeing demand from.

William R. Crooker: Logistics companies three P. L demand is still holding up.

William R. Crooker: So no.

William R. Crooker: Let's say if you want to, if you want an answer on some theme, it's just what I said earlier in the call. We're seeing a little bit more, you know, big box leasing and some of those big box markets. South Dallas had some leasing. We saw some leasing in Phoenix and some in Atlanta, some of the bigger boxes, but that's, It feels like that's a little early, so I don't want folks to extrapolate too much on that. But if you're going to have one theme, that's kind of the small theme that we're

William R. Crooker: No major themes that say if you want to.

William R. Crooker: Wanted an answer for some theme, it's just what I said earlier on the call, we're seeing a little bit more.

William R. Crooker: Big box leasing and some of those big box.

William R. Crooker: Markets, South Dallas had some leasing.

William R. Crooker: We saw some leasing in Phoenix and some in Atlanta, some of the bigger boxes, but.

William R. Crooker: That's it feels like that's a little early so I don't want.

William R. Crooker: Yes folks to extrapolate too much on that but thats, if youre going to have one theme that's kind of the small theme that we're seeing right now.

Jason Belcher: Got it, thanks. And then secondly, can you just talk a little bit about your contractual rent increases or rent bumps and what you're incorporating into newly signed leases there? And, you know, what kind of pushback, if any, you're getting on that part of the lease agreement? And maybe if you could just remind us what your average escalator is across the portfolio, that'd be helpful.

William R. Crooker: Got it thanks and then.

William R. Crooker: Secondly, can you just talk a little bit about your your contractual rent increases or rent bumps and what you're incorporating into newly signed leases there.

Jason Belcher: What kind of pushback, if any youre getting on that part of the lease agreement and maybe if you could just remind us what's your average escalator is across the portfolio that'd be helpful.

William R. Crooker: Yeah, I'll start off with what we're seeing in new leasing. Rental rates are holding up, and escalators are holding up. So we're seeing, you know, average escalators being signed in the three and a half range. You know, we signed one this last quarter that had a four on it.

Jason Belcher: Yeah.

Speaker Change: I'll start off with what we're seeing in new leasing this.

William R. Crooker: Rental rates are staying out or are holding up and <unk>.

William R. Crooker: Escalators are holding up so we're seeing you know average escalators being signed in the three and a half range.

William R. Crooker: We signed one this last quarter out of four on it. So we're still seeing some strong escalators and strong.

William R. Crooker: So we're still seeing some strong escalators and strong, you know, face rental rates. Matts, do you want to talk about the average for the portfolio? Absolutely. Hey Jason.

William R. Crooker: Rental rates Matthew I'll talk on the average for the portfolio, absolutely Hey, Jason.

Matts S. Pinard: The weighted average escalator across the portfolio continues to increase, you know; there is upward pressure. It's really just math, as Bill explained; a weighted average escalator right now is a tick above 2.7%. But again, as Bill mentioned, if you continue to sign those leases with the 3, 3.5, 4% escalators, that number will increase mathematically. You know, that's the biggest, I would say, building block to our sustainable same store.

Matts: Weighted average escalators across the portfolio continues to increase there is upward pressure.

Jason Belcher: Got it. Thanks, guys. Really helpful.

Matts S. Pinard: Just math as Bill explained our weighted average escalator right now as it took about two 7%, but again as Bill mentioned you continue to sign those leases with the 335, 4% escalators that number will increase mathematically.

Jason Belcher: That's the biggest I would say building block to our sustainable same store growth.

Jason Belcher: Got it thanks, guys really helpful.

Jason Belcher: Yeah.

Operator: Our next question comes from Samir Khanal from Evercore ISI. Please proceed.

Jason Belcher: Our next question comes from Samir Khanal from Evercore ISI. Please proceed.

Samir Upadhyay Khanal: Hey, Bill, just one for me here. I mean, you made the comment about tenants taking longer to make decisions. Well, that's been playing out for a while now. But, you know, just trying to understand, was there sort of a sudden shift in timeline that you saw maybe at the end of March or even April?

Samir Upadhyay Khanal: Hey, Bill.

Samir Upadhyay Khanal: One for me here I mean, you made the comment about tenants taking longer to make decisions.

Samir Upadhyay Khanal: Playing out for a while now but.

Samir Upadhyay Khanal: Just trying to understand what was there sort of a sudden shift in timelines.

Samir Upadhyay Khanal: That you saw maybe at the end of March or even April.

William R. Crooker: No, I wouldn't say a sudden shift. It continues to be, and this is a theme that kind of started at the end of last year, middle of the 10th year, where decision-making capabilities were pushed to corporates, right into the C-suites. So instead of the local teams being able to make a decision, it's being pushed to corporate. It's just taking a little bit more time to make sure that, you know, and this depends on the market, right? So if you've got a market that has a little bit more supply, and tenants aren't pushed to make a decision quicker, right? Because there are more options available to them.

Bill: No I wouldn't say a sudden shift it continues to be and this is a theme that kind of started at the end of last year middle middle tend to last year, where.

William R. Crooker: The decision, making capabilities were pushed to corporates right into the C. Suites. So instead of the local teams being able to make a decision.

William R. Crooker: It's being pushed to corporates.

William R. Crooker: It's just taking a little bit more time to make sure that.

William R. Crooker: And this is it depends on the market right. So if you've got a market that has a little bit more supply.

William R. Crooker: Tenants arent push to make a decision quicker right because there's more options available to them.

William R. Crooker: As I mentioned, as I went through some of the markets that we're in, there's a lot of steadiness in those markets and balanced supply and demand. So in those markets, you're seeing tenants make decisions, you know, probably in line with what they have been. And some of these markets that have oversupply, and they're bigger box decisions, are taking a little bit longer. When you compare decision-making timelines to, you know, 21, 22, yeah, they're definitely pushed out, you know, one to one to three months.

William R. Crooker: As I mentioned as I went through some of the market's aware and Theres a lot of steady missing those markets imbalanced supply and demand so in those markets you're seeing tenants.

William R. Crooker: Make decisions probably in line with what they have been in some of these markets have oversupply and Theyre bigger box decisions are taking a little bit longer when you compare decision, making timelines to 'twenty. One 'twenty two yes, there are definitely pushed out one to one to three months in.

William R. Crooker: When you compare it to last year, depending on the market maybe they pushed out a couple of few weeks, depending on the market some markets might be a little bit longer in some markets. There's no change at all.

William R. Crooker: And, you know, when you compare it to last year, depending on the market, maybe they're pushed out for a couple of weeks, depending on the market, some markets might be a little bit longer in some markets, there's no

Samir Upadhyay Khanal: So it doesn't look like, given the rate spike we had sort of at the end of March or April, there's been any sort of... I don't think it was a reaction to a 30 basis point increase.

William R. Crooker: So it doesn't look like given the rates Spike we had sort of at the end of March or April we've seen theres been any sort of.

Speaker Change: Yeah, I don't think it was a reaction to a 30 basis point increase in the tenure.

William R. Crooker: Yeah, yeah, no, I got it. Okay, just making sure. All right. Thank you.

Speaker Change: Yeah, Yeah got it okay, just making sure alright. Thank you.

William R. Crooker: Thanks.

Operator: Our next question comes from Michael Carroll from RBC. Please proceed.

William R. Crooker: Our next question comes from Michael Carroll from RBC. Please proceed.

Michael Albert Carroll: Yep, thanks. Bill, you highlighted a number of development projects in your prepared remarks that the company is committed to. I'm sorry if I missed this, but did you mention how much capital STAG has committed to build those projects? And what's the target initial yield on those projects also?

Michael Albert Carroll: Yeah. Thanks, Bill you highlighted a number of development projects in your prepared remarks that the company is committed to I'm sorry, if I missed this but did you mentioned how much capital stag has committed to build those projects in and what's the target initial yield on those projects also.

William R. Crooker: Yeah, in terms of, yeah, I'll walk through, you know, quickly the yields and Steve Kimball can walk through kind of the progress and the remaining capital committed. The first project is the one in Greer that I mentioned. That started back in April, March, or April of 2022.

Bill: Yeah in terms of.

Michael Albert Carroll: Yeah.

William R. Crooker: Walk through quickly that the yields and.

William R. Crooker: And Steve Campbell can walk through kind of the progress and.

Speaker Change: The remaining capital committed.

William R. Crooker: I mean the.

William R. Crooker: The first project is the one in Greer that I mentioned that started back in April May March or April of 2022 those.

William R. Crooker: Those buildings are great, well located. They have excess power. One of the buildings has twenty-five hundred amps, and the other one has five thousand. So they cater both to logistics tenants and light manufacturing tenants, and that's the demand in that market. It's these buildings, as I mentioned, the preparator marks close to the BMW plant. That's increasing capacity, especially for EV vehicles close to the port. That's growing in Greer on I85. So there are a lot of demand drivers and a lot of light manufacturing there. So those are those assets.

William R. Crooker: Those buildings well located.

William R. Crooker: They have excess power one of the buildings is 2500 amps. The other one is 5000 amps. So they cater both to logistics tenants a light manufacturing patents and that's the demand in that market. It's these buildings as I mentioned in the prepared remarks close to BMW plant, that's increasing capacity, especially for E V vehicles.

William R. Crooker: Close to an import that's growing and career I 85, and so a lot of demand drivers and a lot of light manufacturing there. So.

William R. Crooker: Those are those assets, we expect to stabilize in the mid five range and part of that as you know when you put these projects under <unk>.

William R. Crooker: We expect to stabilize in the mid five range, and part of that is, you know, when you put these projects under contract back in March and April 2022. The asset in Spartanburg, if you recall, that's the one we acquired partially developed in Q4 of last year, really required one that was just recently completed, call it the sister building. That's the one we leased almost immediately. We underwrote a seven yield, at least for a seven and a half, about 11 months ahead of schedule.

William R. Crooker: Their contract back in.

William R. Crooker: March and April 22, 2022.

William R. Crooker: Asset in Spartanburg.

William R. Crooker: If you recall that's the one we acquired partially developed in.

William R. Crooker: In Q4 of last year really required one that was just recently completed call. It the sister building that's the one we.

William R. Crooker: Almost immediately we underwrote a seven seven yield lease for seven and a half about 11 months ahead of schedule.

William R. Crooker: So that building is coming online. We anticipate a seven cap for that. We're underwriting a 12-month downtime. Obviously, we have a similar outcome as a sister building, but again, we're prudent with the terms of how we underwrite these assets. So that's a seven cap. And then with respect to the Tampa market, I touched on the suite sizes there, the Tampa market sub 3%, vacancy rate, a really strong market. That one is probably going to stabilize in the mid-sixties.

William R. Crooker: That building.

William R. Crooker: It's coming online we anticipate a seven cap for that we're underwriting a 12 month downtime hopefully we.

William R. Crooker: We have a similar outcome as a sister building, but again, we were prudent with in terms of how we underwrite. These assets. So that's a seven cap and then with respect to the Tampa.

William R. Crooker: Market I touched on the suite sizes, there Ted market sub 3% vacancy rate a really strong market.

William R. Crooker: That one is probably a.

William R. Crooker: Got to stabilize in the mid sixes.

William R. Crooker: It all depends.

William R. Crooker: It all depends. So we'll see if, you know, what market rent there is, but the fundamentals in the market are really strong. And Steve, I mean, generally, do you want to just touch on kind of where we are on a total basis on committed capital and what's remaining?

William R. Crooker: That's at the current market rents so we'll see what market rent does there, but the fundamentals in the market are really strong and Steve I've been generally do you want to just touch on kind of where we are on a total basis on committed capital and what's remaining committed capital worried about $118 million and I think that makes sense, Michael because the Greenville Spartanburg market.

Steve Kimball: Yeah, and committed capital, we're at about $118 million. And I think that makes sense, Michael, because in the Greenville-Spartanburg market, where we talked about the two projects we have going, those are generally completed for construction. So the majority of the money's been spent, and we're switching to the lease-up period for those. At Tampa, we're about 50% done with that project. So in Greenville-Spartanburg, those projects are around 92% funded, and we're about 50% for Tampa. So overall, about $118 million has been committed to a little over $150 million of projected capital for those projects.

Steve Kimball: When we talked about the two projects we have going those are generally completed for construction. So the majority of the money has been spent and we're switching to the lease up period for those in Tampa, where about 50%.

Steve Kimball: With a with that project so in the Greenville, Spartanburg those projects around 92% funded and more about 50% for Tampa. So overall committed is about 118 has been spent a little over $150 million of projected capital for those projects, yes, another 30, or so million Mike to be spent.

William R. Crooker: Yes, another 30 or so million dollars, Mike, to be spent.

Michael Albert Carroll: Okay, great. No, that's helpful.

Speaker Change: Okay, Great No. That's helpful. And then I guess, how do you think about pursuing new starts I mean does this recent slowdown does that.

William R. Crooker: And then, I guess, how do you think about pursuing new starts? I mean, does this recent slowdown make you want to slow down in making these decisions and waiting for these assets to get leased up? I guess, how do you kind of underwrite those new projects? Yeah, I mean, it's market by market specific and returns.

William R. Crooker: Make you want to slow down and making these decisions and waiting for these assets to get it leased up I guess, how do you kind of underwrite those new projects.

William R. Crooker: Yeah, I mean, it's market by market and return-specific. So if there's a market that we see, you know, really healthy supply and demand, and we like the return profile, we'll certainly start a project in one of those markets. What I like about us phasing into this development platform is that, you know, we're not buying the raw land and going through all the entitlement work and having a three-year horizon between, you know, day one and finishing the project. So our time horizons are, you know, much shorter, usually 12 months or a little bit longer.

William R. Crooker: Yeah, I mean, it's market by market specific in return specific so if there is a market that we see really healthy supply demand.

William R. Crooker: And we like the return profile. We're certainly we're certainly start a project in one of those markets what I like about <unk>.

William R. Crooker: Phasing into this development platform is that we're not buying the raw land and going through all the entitlement work and having a call. It a three year horizon between day, one and finishing the projects so our time horizons.

William R. Crooker: Sure I, usually 12 months or a little bit longer. So the outlook is clearer I think.

William R. Crooker: So the outlook is clearer, I think the expected returns are a little lower because there's less risk. So if the market is strong, and the returns are adequate for what we expect for developments, which are obviously much higher than a stabilized acquisition, then it would be fine to enter more projects. As I said, we only have another 30 million left to spend on these projects. The Greenville project, you know, the vacant asset was leased immediately, and that sister building should do really well. So I think we're balanced with our approach here. I think we're probably a little bit conservative, and to the extent that we see a good opportunity, we'll execute on it.

William R. Crooker: The returns expected returns are a little lower because there's less risk so if the market.

William R. Crooker: Is strong and the returns are adequate.

William R. Crooker: For what we expect for developments, which are obviously much higher than a stabilized acquisition that would be would be fine enter into more projects. As you said, we only have another $30 million.

William R. Crooker: Left to spend on these projects.

William R. Crooker: <unk>.

William R. Crooker: The Greenville project.

William R. Crooker: You know the bacon as at least immediately.

William R. Crooker: And that sister building should be really well. So I think were balanced with our approach here I think we're probably a little bit conservative and to the extent, we see a good opportunity we will execute on it.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

William R. Crooker: Okay.

William R. Crooker: Okay.

Operator: Our next question comes from Mike Miller from J.P. Morgan. Please proceed.

William R. Crooker: Our next question comes from Mike Mueller from J P. Morgan. Please proceed.

Michael William Mueller: Yeah, hi. Just a quick one on cap rates and guidance. And Bill, I know you talked a little bit about acquisition volumes being wider and back-end loaded. Just, if we're in this world where the 10-year is, you know, and the 4.6 is, you know, 4.7 or so for some period of time, do you think your cap rate guidance holds?

Michael William Mueller: Yeah, Hi, just.

Michael William Mueller: Quick one on cap rates and guidance and I know you talked a little bit about acquisition volumes being wider range and backend loaded.

Michael William Mueller: If we're in this world where the 10 year is four six is four seven or so for for some period of time do you think your cap rate guidance holds.

William R. Crooker: Well, if our cap rate guidance holds, considering what we've already closed and put under contract, that kind of weights it down, because it was a different interest rate period. But in terms of new acquisitions, putting them under contract, those are going to have higher yields, you know, at the high end of the range, and maybe even a little bit higher. Got it, okay.

Bill: Well, if we're our cap rate guidance.

William R. Crooker: <unk> if you know.

William R. Crooker: Considering what we've already closed and put under contract.

William R. Crooker: Wait to down it was a different interest rate period, but in terms of new acquisitions, putting it under contract those are going to be higher yields at.

William R. Crooker: At the high end of the range and maybe even a little bit higher.

Michael William Mueller: Got it. Okay. That was it.

William R. Crooker: Got it okay.

Speaker Change: That was it I appreciate it thank you.

Michael William Mueller: Thanks.

Operator: I appreciate it. Thank you. Thank you. Our next question comes from Bill Crow from Raymond James.

William Andrew Crow: Our next question comes from Bill Crow from Raymond James. Please proceed. Yeah, good morning. Most of my questions have been answered, but you asked one anyway.

Michael William Mueller: Our next question comes from Bill Crow from Raymond James. Please proceed.

William Andrew Crow: Yes. Good morning, most of my questions have been answered but.

William Andrew Crow: You alluded to stronger leasing and some big box.

William Andrew Crow: So I'm wondering if that's e-commerce tenants or whether theres any common theme in.

William Andrew Crow: And the demand that youre seeing there.

William Andrew Crow: Yes, I mean.

William R. Crooker: There's a, you know, one, you know, very large e-commerce tenant that we're all, you know, household names, that's at least some of the space. Some big retailers took some space. And I think, I think another one was a large e-commerce tenant next to it.

William Andrew Crow: There's a.

William Andrew Crow: One.

William R. Crooker: Very large e-commerce tenant where all household name that's leased some of the space.

William R. Crooker: Yeah. So I was just looking over at Steve, and he was shaking, said yes. So I got that one. Right? But I just want to, you know, caution those comments in that, you know, this is the start of it. Right. So I don't want my comments to be extrapolated, like, you know, big boxes back where everything's healthy there. But it's, it's starting, we're seeing some positive signs there, which is, which is great. I just, I don't want to oversell that.

William R. Crooker: Some big retailers take some space.

William R. Crooker: And I think.

William R. Crooker: I think another one was with a large e-commerce tenant to it yeah. So I was just looking over to Steve and he was shaken said, yes, so I got that one right.

William R. Crooker: But I just want to caution those comments and that this.

William R. Crooker: As the start of it right. So I don't want it to I don't want my comments to be extrapolated like big box back where.

William R. Crooker: Everything is healthy there.

William R. Crooker: It's starting we're seeing some positive signs there, which is which is great I just I don't want to oversell that.

Speaker Change: Yes fair enough alright that was it for me. Thank you alright, Thanks Bill.

William R. Crooker: Okay.

Operator: Our next question comes from Camille Bonnel from Bank of America. Please proceed.

William R. Crooker: Our next question comes from Camille Bonnell from Bank of America. Please proceed.

Jing Xian Tan Bonnel: Hi, good morning. This is Andrew Berger on behalf of Camille. Appreciate your outlook on market rent growth. Just curious if you have a view on when we'll see peak vacancy.

Camille Bonnel: Hi, Good morning. This is Andrew Berger on four Camille appreciate your outlook on market rent growth. Just curious if you have a view on when we will see peak vacancy.

William R. Crooker: It's market-by-market specific. The markets that are oversupplied right now, you can see peak vacancy at the end of this year, and it could take all of next year to kind of wind that down to more normalized levels and then steadier markets. I think they're going to continue to be steady. Maybe you see a little bit of a spike in vacancy as we move through the year, but it won't be as material as some of those other markets. It really is a market by market answer, so it's hard to generalize.

Andrew Berger: So it's market by market specific.

William R. Crooker: The markets that have oversupplied right now you could see a peak.

William R. Crooker: Peak vacancy at the end of this year and start.

William R. Crooker: Could take all of next year to kind of wind that down to more normalized levels and then steadier markets.

William R. Crooker: I think they're going to they're going to continue to be steady. So maybe you see a little bit of a spike in vacancy as we move through the year, but it won't be as material as some of those other markets.

William R. Crooker: It really is a market by market.

William R. Crooker: Answer and so it's it's a hard to its hard to generalize it.

Jing Xian Tan Bonnel: Okay, that makes sense. And just circling back to the earlier comments around slower decision making and, you know, the decision shifting maybe from a real estate manager to the C-suite, just curious, what do you think it'll take to shift that decision back to the real estate manager? Is it really a matter of supply, interest rates, or something else?

Speaker Change: Okay that makes sense and just circling back to the earlier comments around slower decision, making and you know.

Jing Xian Tan Bonnel: The decision shifting maybe from a real estate manager to.

Jing Xian Tan Bonnel: C suite, just curious what do you think it'll take to <unk>.

Jing Xian Tan Bonnel: That decision back to their real estate managers, it really a matter of supply interest rates or something else.

William R. Crooker: It could be.

William R. Crooker: It could be It could be one or both of those, you know, as Tenants are required to make quicker decisions, and that's kind of on the supply side of it. They have to push that decision-making, you know, those decision-making capabilities down to the regional teams. Otherwise, deals won't get done, and they'll miss space. I think if you've got interest rates coming down, and there's more confidence among some of the, you know, the C-suites in these companies, then they may just say.

Jing Xian Tan Bonnel: It could be it could be one or both of those.

William R. Crooker: You know as <unk>.

William R. Crooker: Tenants are required to make quicker decisions and that's kind of on the supply side of it.

William R. Crooker: They have to push that decision, making this.

William R. Crooker: Decision, making capabilities down to the regional teams.

William R. Crooker: Otherwise deals won't get done and they'll Miss space.

William R. Crooker: If you've got interest rates coming down and there's more confidence with some of the you know the.

William R. Crooker: C suites.

William R. Crooker: In these in these companies.

William R. Crooker: Then they may just say.

William R. Crooker: Let's take down space. We're projecting, you know, more demand, higher revenues, so let's build out our supply chain and get ahead of that. So I think it could be one or both or some combination. Okay, great. Thank you.

William R. Crooker: Let's take down space.

William R. Crooker: We're projecting.

William R. Crooker: More demand higher revenues, let's build out our supply chain and to get ahead of that so I think it.

William R. Crooker: It could be one or both or some combination.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

William R. Crooker: This concludes our question and answer session. I would like to turn the floor back over to Bill Crooker for closing comments.

William R. Crooker: This concludes our question and answer session I would like to turn the floor back over to Bill Crooker for closing comments.

William R. Crooker: Thank you everyone for participating in the call this morning. As always, we appreciate the thoughtful questions, and we look forward to seeing many of you at the upcoming conferences. Thank you.

William R. Crooker: Thanks, everyone for participating in the call. This morning.

William R. Crooker: As always we appreciate the thoughtful questions and we look forward to seeing many of you at the upcoming conferences. Thank you.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

William R. Crooker: This.

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Speaker Change: Todays teleconference. You may disconnect your lines at this time, thank you for your participation.

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